FOREX-Dollar hovers above one-month lows before payrolls test

  • 9/3/2021
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* Friday’s jobs data could spur Fed to taper earlier * Euro shows strength ahead of ECB meeting next week * Yen shrugs off PM Suga’s decision to step down * Graphic: World FX rates tmsnrt.rs/2RBWI5E LONDON, Sept 3 (Reuters) - The dollar hovered above one-month lows against major rivals on Friday, ahead of a U.S. jobs report that could spur the Federal Reserve to an earlier tapering of stimulus. The dollar index, which measures the greenback against six peers, was little changed at 92.227 after earlier touching 92.151 for the first time since Aug. 5. The euro was also mostly flat at $1.1876, after hitting the highest since Aug. 4 at $1.1884, supported by regional inflation at a decade high and hawkish rhetoric from European Central Bank officials ahead of a policy meeting on Sept. 9. Meanwhile, the U.S. central bank has made a labour market recovery a condition for paring pandemic-era asset purchases. “With 5.7mn less people employed than in February 2020, the bar looks quite high for the Powell Fed to be hurried into announcing tapering at Sep 22nd Fed meeting,” ING strategists said in a note. “Unless we do see a 1mn+ NFP (non-farm payrolls) figure today, we would say DXY can continue to drift to the 91.80/92.00 area - especially since the EUR should stay supported into next Thursday’s ECB meeting,” ING said. The dollar had been strengthening for most of last month on the view that a taper could be imminent, even as COVID-19 cases spiked in the United States, which paradoxically gave the currency an additional boost because of its role as a safe haven. But the dollar index retreated after hitting a 9-1/2-month high of 93.734 on Aug. 20 as Fed officials began suggesting the virus’ spread could delay policy tightening. Chair Jerome Powell said at the Fed’s Jackson Hole symposium a week ago that a taper was still possible this year, but there was no hurry to subsequently raise interest rates, sending the dollar down further. Monthly non-farm payrolls, due later on Friday, are expected to rise by 750,000, with the unemployment rate falling to 5.2% from 5.4%, according to a Reuters poll of economists. However, estimates range widely, from as little as 375,000 to over a million. Signals from the economy ahead of the report have been mixed. Overnight, data showed layoffs dropped to their lowest in more than 24 years. However, the ADP National Employment Report on Wednesday was much weaker than economists expected. Commonwealth Bank of Australia forecasts the United States added 800,000 jobs last month, which it says would be enough to spur the Fed to taper, although the bar for an announcement at this month’s meeting has been raised by the current outbreak. “The risk is uncertainty associated with the virus stands in the way of an imminent taper announcement,” which would reverse any dollar gains from a strong payrolls report, CBA strategists wrote in a report. The Australian dollar rose to a seven-week high of $0.7434, up 0.4% on the day after earlier touching a one-month high . The New Zealand dollar gained 0.1% to $0.7117 after rising to the highest since June 16 at $0.7130. The greenback added 0.1% to 110.03 yen, holding near the centre of its trading range since early July and showing little reaction to Prime Minister Yoshihide Suga’s decision to step down at the end of the month.

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